THDA Examines Housing Affordability and the Limits of Supply-Only Solutions

NASHVILLE, Tenn. (April 20, 2026) — Housing costs across Tennessee have risen sharply over the past decade, with both home prices and rents increasing not only in major metropolitan areas such as Nashville and Knoxville, but also in smaller markets including Chattanooga and Murfreesboro. As affordability challenges continue to intensify, identifying effective, sustainable solutions has become increasingly urgent for the long-term well-being of Tennesseans.

Hülya Arık, PhD, senior economist for the Tennessee Housing Development Agency (THDA), recently published an article titled Building Our Way to Affordability? What the Housing Supply Debate Means for Tennessee. In the article, Arık examines the role of housing supply in addressing affordability challenges and cautions that while increasing supply can help reduce price pressures over time, housing construction alone is unlikely to meet the needs of low- and extremely low-income households.

“The evidence suggests the debate is not an either/or choice,” Arık writes. “Increasing housing supply is essential to stabilize markets and prevent prices from rising further, while targeted affordable housing programs—such as subsidies, tax credits, and rental assistance—remain critical for households the market cannot serve.”

THDA Executive Director Ralph Perrey echoed that assessment, emphasizing the importance of a balanced approach.

“The basic economics of supply and demand are clearly at work in today’s housing market as prices continue to rise,” Perrey said. “But Dr. Arık’s analysis reminds us that building more units alone will not solve affordability challenges for our most vulnerable populations.”
Ultimately, the article concludes that supply-side solutions and affordability programs are most effective when implemented together.

“Supply and subsidy policies work best together,” Arık notes, adding that “without supply growth, subsidies must compete with rising prices. Without subsidies, the market may leave some households behind. Combined, these policies can address both long-term housing shortages and immediate affordability needs.”

Read the full article, Building our Way to Affordability? What the Housing Supply Debate Means for Tennessee.

Since 1973, the Tennessee Housing Development Agency has been at the forefront of expanding housing opportunities across the state. As Tennessee’s housing finance agency, THDA works to promote the production, preservation, and rehabilitation of affordable housing for low- and moderate-income households.

For more information, contact Rebecca Anderson, Communications Director, THDA.
(615)-815-2185 | Randerson@thda.org